That uncertainty stuff that lots of people believe is paralyzing the economy? According to Kevin Drum it's all in our little minds:
The uncertainty meme is just mind boggling. Businesses always have a certain amount of regulatory uncertainty to deal with, and there's simply no evidence that this uncertainty is any greater now than it usually is.
Let's just see what he has to say to back that up.
Interest rates will remain very low for a very long time. The Fed has made this as clear as any central bank possibly could.
The Fed is at the very bottom of their bag of tricks. All they have left is inflating the dollar and the belief that they can do so without losing control of inflation. Think interest rates will stay so low if inflation goes to 4% or more likely higher? Want to stake your business on Ben Bernanke's totally awesome ability to keep everything under control? I didn't think so.
PPACA has no impact on small businesses and only a minuscule impact on large businesses. Medium-sized businesses face a modest penalty if their workers use federal subsidies to enroll in private insurance programs via the exchange. In other words, the overall financial impact on the business community is pretty modest. What's more, there's really not much uncertainty here. The broad impact of PPACA's rules is already clear, and they don't take effect until 2014 anyway. This is not having a significant impact on business investment decisions in 2010.
You know, for something that isn't going to take effect until 2014 there are an awful lot of companies getting waivers from it this year. And come on, not much uncertainty here? They can't even figure out how many agencies, panels, and commissions will be issuing regulations and making policy decisions:
Don’t bother trying to count up the number of agencies, boards and commissions created under the new health care law. Estimating the number is “impossible,” a recent Congressional Research Service report says, and a true count “unknowable.”
Obamacare is 2000 pages of pretty much "whatever we damn well please" and Drum has the chutzpah to write that there's not much uncertainty here. Wow.
There's no excuse for Congress leaving tax policy up in the air for as long as it has. But even with that said, the Bush tax cuts affected personal tax rates, not business rates. And despite demagoguing to the contrary, even if the Bush tax cuts expire completely the effect on small businesses would be close to zero.
Oh bullshit. There are two reasons why I think so. The first is that most small businesses count profits as personal income at the end of the year:
More than half of all business income in the United States is reported on individual returns, not corporate returns. This income is reported by proprietorships, partnerships, LLCs, and S corporations. If the top two individual income tax rates are increased, it would hit a substantial amount of this business income.
You cannot take billions more out of the hands of entrepenuers and expect that there will be no effect on business reinvestment and growth, particularly on those who earn below $1 million. These days a lot of those on the lower end are finding that their profits are all they have for working capital as banks continue to restrict lending. The question is not if it will hit small business, it's how bad? That's really brilliant policy as we struggle to avoid a double-dip recession.
The second impact is the likely reduction in spending from those top two groups. Kevin Drum may hate that "the rich" have money to spend on pools, or a new kitchen, or an addition to the cabin, but the small business owners who mostly perform that work love them. For some a tax increase will mean less disposable income, for others it will mean less capital to invest. Neither one is particularly good for the economy, but then huge deficits aren't either. I would be okay with looking at a tax increase on incomes well above what Obama considers the rich, but only if accompanied by spending cuts, real spending cuts, and only if the tax increases actually raise more revenue over the long run compared to current rates.
Financial reform was a fairly modest affair, and in any case its effect is almost entirely restricted to the financial sector. Its effect on the rest of the business community is slight.
It should be pretty clear by now that Kevin Drum thinks we are all complete idiots. Take a look at this instead:
Another monster bill that effects huge numbers of consumers and businesses, will be lobbied to death by all sorts of rent seekers, and will be every bureaucrat's dream path to regulatory discretion/power. Yeah, no uncertainty or reason to worry about that!
There is no possibility in the near future of a carbon tax.
That's true. All that every consumer and business in America has to worry about now is the EPA's assertion that they don't need a bill and can regulate carbon dioxide emissions under existing law:
Enter Jackson, who is pursuing her work, thanks to a 2007 Supreme Court decision clearing EPA to write climate rules as long as the agency could prove greenhouse gases threaten public health or the environment. The first hammer comes down in January with greenhouse gas limits on some of the biggest industrial sources, namely power plants and petroleum refiners, which are already in various stages of the air pollution permitting process.
An additional set of climate-themed requirements will come in July for both existing and new industrial plants that trigger the permit rules by increasing their emissions.
Combined, Jackson said those two rules should make a noticeable dent in the nation’s greenhouse gas emissions. “It’s not the majority of the regulated community,” she said. “But because of those two things together, that’s a large segment of the workload."
Yeah, nothing to worry about there in terms of increased costs and ripple effects throughout the economy. I totally believe in the awesome power of the EPA to do this without screwing the economy over. And unicorns.
There is no question about the federal government's long-term ability to meet its debt obligations, and even if there were this would have very little effect on short-term investment decisions by American businesses.
Unbelievable. Of course, in a way, Drum's correct. There is no question about the federal government's long-term ability to meet its debt obligations...IT CAN'T. We can debate what we need to cut and by how much, but there are huge entitlement obligations out there now that everyone knows we will not be able keep. To the extent that affects investment decisions by small businesses in particular it is the hunker down effect that lack of confidence in the future brings.
The elections of 2010 were about a lot of things, but one of the most important to me was to stop the bullshit. Stop pissing on our shoes and telling us it's raining. It is becoming clearer and clearer that President Obama and Democrats like Reid and Pelosi, and especially progressives like Drum, have blown off that message. Fine. Keep it up. 2012 is going to be a political ass-kicking of biblical proportions.
More: A similar, but better documented take from heritage.org.